The Malaysian economy is facing the challenge of a rapidly changing industrial landscape due to the emergence of Industry 4.0.
Industry 4.0, also known as the Fourth Industrial Revolution (IR4.0 or 4IR), calls for a shift in how industries operate, focusing on increased automation and data exchange in manufacturing technologies.
This changing industrial landscape presents opportunities for Malaysian industries, especially small and medium enterprises (SMEs), to invest in and adopt new technologies and processes in order to become more competitive and efficient.
IR4.0 to boost the economy
SMEs’ contribution to the country’s exports accounted for only 12 per cent in 2021 compared with the target of 25 per cent in the 12th Malaysia Plan (12MP), while their contribution to the nation’s gross domestic product stood at 37 per cent in 2021 versus the 45 per cent target in the 12MP.
Hence, there is a need to encourage SMEs to embrace IR4.0 to maximize their potential and make a bigger contribution to the country’s export value and eventually become the engine of economic growth, according to the Malaysian Investment Development Authority (MIDA) executive director of investment policy advocacy (manufacturing) Mansi Muhammad.
“In terms of operating and labor costs, we have an incredible opportunity to leverage IR4.0 and the latest technology to stay competitive with our regional friends such as Vietnam, Indonesia and Thailand.
“By investing in the latest machines and adopting technology, SMEs can increase their productivity and remain competitive in the global market. Let us take advantage of this incredible opportunity for growth and success, “she told Bernama.
To ensure that Malaysia gets the optimum benefits from IR4.0, Masni said the government had launched the National 4IR Policy in July 2021, in anticipation of emerging developments as well as to provide guidance and promote coherence in achieving the 4IR agenda.
The 4IR policy complements the Malaysia Digital Economy Blueprint (MyDIGITAL) in driving the digital economy development agenda.
Financial support facility for SMEs
As part of the coordinated IR4.0 strategy, the Ministry of International Trade and Industry has appointed MIDA as the implementing agency for the financial support facility known as Industry4WRD Intervention Fund.
The fund will provide eligible SMEs with a grant of up to RM500,000 on a matching basis (70:30), based on eligible expenditures.
A maximum of 30 per cent of the matching amount (out of 70 per cent of the total grant) will be awarded upfront to the companies, and the remaining grant will be reimbursable.
Masni said 281 SMEs were approved to receive the financial support facility from 2020 until 2022, with a total grant value of RM101.4 million.
Out of the total, 82 SMEs were approved for the fund in 2020, 111 in 2021 and 88 in 2022.
Additionally, there is an incentive known as the Automation Capital Allowance (Automation CA), which encourages manufacturing and services companies to adopt automation and enhance their productivity through investment in automated machinery and equipment.
For this incentive, the government is providing an Automation CA of 200 per cent on the first RM4 million expenditures incurred for labour-intensive industries and 200 per cent on the first RM2 million expenditures for other industries, including services.
Strategic programs to empower SMEs in IR4.0
MIDA has also formulated strategic programs to continue facilitating the establishment and expansion of multinational corporations (MNCs), large local companies (LLCs), and mid-tier companies in Malaysia.
Equipped with a structured and completed ecosystem in various industries, Masni said MIDA promotes strategic collaborations between domestic companies with MNCs and LLCs to become part of the local supply chains with technological capabilities.
“The MIDA-Perodua Digital Transformation Ecosystem Program launched in 2020 has been essential in driving forward the capabilities of local automotive players in Malaysia.
“This initiative has enabled local players to remain competitive and keep pace with the ever-evolving automotive industry.
“Through a series of facilitation sessions, all vendors have started their digitalization journey, which takes three years to complete the (IR4.0) projects,” she said.
Additionally, Masni said MIDA has collaborated with Malaysia Digital Economy Corporation (MDEC) since last year for the setting up of the Digital Investment Office (DIO) to coordinate and facilitate all digital investments in Malaysia, in line with the government’s aim to attract RM70 billion investments in digitalization by 2025.
“The setting up of the DIO is timely and in accordance with the evolution of the global investment landscape towards digitalization and IR4.0, creating unique and exciting value propositions for digital projects.
“The clusters of digital enablers including data center infrastructure, artificial intelligence, cloud computing, and big data analytics expand opportunities for support services, skilled jobs and productivity upskilling among both large and small business communities,” she added.
Masni said MIDA has put forward new proposals to the government, mainly to increase the adoption of technology and automation among domestic companies, especially SMEs.
“In terms of industrial development, the focus is on making sure that the SMEs adopt technology, reduce reliance on foreign workers and increase productivity.”
As the country advances, she said the SMEs should leverage and take advantage of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership which was ratified by the government last year.
“Whenever we sign free trade agreements, there are benefits whereby we can enter other markets, expand our trades and export more, but it is undeniable that SMEs face specific challenges due to increasing competition, while some may not be adequately prepared.
“Hence, we need to improve our competitiveness which goes back to the adoption of technology, innovation, as well as research and development to expand their capabilities and increase performance,” she said.